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State Farm loses Katrina fraud case

Tue, 09 Apr 2013 17:48:21 CDT
By: Charlie Schlenker

A Mississippi Jury has convicted State Farm Insurance of defrauding the federal flood insurance program by falsely claiming Hurricane Katrina damage to a home was from water and not wind. The jury agreed with two whistleblowers that workers for the Bloomington-based company demanded changes in reports so State Farm would not be obligated to pay the claim. The former independent auditors for the company said one damage report had a post it note attached saying "do not pay bill...do not discuss." A Mississippi newspaper indicates the quarter million dollars State Farm will have to repay the government is for a single home. The case could also prompt review of thousands of Hurricane Katrina claims that were eventually paid by the federal flood insurance program. State Farm Spokesman Jeff McCollum says the verdict defies the clear evidence presented at trial. One witness for the company noted the water mark in the home was five feet up on the wall. Opposition witnesses testified much of the lower floor damage happened before the water came in. But, the company claimed that water had more to do with the destruction because the second floor had far less damage. McCollum says State Farm is reviewing its legal options. One possibility is an appeal.

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